Breaking the three-generation curse – building a lasting legacy of wealth

On a recent episode of Ocorian’s ‘Conversations in Private Wealth’ podcast, Shawn Wang recalled the familiar Chinese proverb: 富不过三代 (‘wealth does not last beyond three generations’). It is a sobering reminder that while the first generation builds wealth, and the second may grow or maintain it, the third often struggles with stewardship. This centuries-old proverb resonates beyond cultural boundaries, speaking to a sobering truth provoked by financial mismanagement, lack of financial literacy and shifting family dynamics.

Each family’s story is unique, yet the widely accepted behavioural pattern, which often is borne out in reality, is: the first generation builds wealth through hard work, grit and sacrifice, which the second generation then grows, often through the help of their predecessors and greater education opportunities. But the third generation, removed from the first generation’s struggles to create  thewealth, may lack the same financial discipline or responsibility, meaning the urgency to preserve and grow wealth diminishes.

It doesn’t have to be this way. The ‘three-generation curse’ is not a destiny; with education, a strong mindset and hard work, it can be overcome.

One strategy we’re increasingly employing at Ocorian to help families avoid this fate is encouraging them to think about a holistic ‘wealth lifecycle’ – a continuous, evolving journey of wealth creation, preservation and transfer. The wealth lifecycle journey begins with who the families are and what they represent. Families are not just asking “How do I protect my wealth?”, but “What kind of legacy am I leaving behind?”. By getting all generations involved in decision making and considering how wealth is created, preserved and transferred across families provides a long-term view of wealth. Leveraging this model helps families structure financial education, governance, and succession planning.

Approaching wealth management holistically, involving those future generations as much as possible, fosters a mindset of stewardship, avoiding the ‘shirtsleeves-to-shirtsleeves’ trap common without intentional legacy planning.

A mistake we often encounter is postponing conversations about wealth with the preceding generation, often out of respect and deference to the elder generation as is common in Asian values. On the other hand, parents might hesitate fearing it will create a sense of entitlement or anxiety among the younger family members. Avoiding these conversations can create more trouble down the line, leaving younger generations unprepared and ill-equipped to handle the responsibility of managing the family wealth.

So, for those hoping to protect their wealth beyond the third generation, the best advice is to treat wealth as safekeeping, a safety net of sorts, and not an entitlement to fall into. Prioritising education and knowledge building and engaging younger family members in financial discussions provides them with insights from a young age and creates purpose around wealth. This helps pass on the moral and conceptual values of a family, as well as the value of its wealth.

To aid this, financial literacy must start early and evolve over time. From understanding the basics of saving and investing to grasping more complex issues like asset protection, philanthropy, or cross-border tax implications, a good education will empower the next generation to become thoughtful, not careless. Families who create formalised learning paths, involve the younger generations in family meetings, and encourage participation in wealth-related decisions often fare far better in preserving wealth across generations.

Beyond education, governance plays an important role. Clear structures, such as family trusts or governance boards, help set expectations so everyone knows their role, preventing future conflicts.

At Ocorian, we understand that every family’s journey is unique. We support family offices, family businesses, and ultra-high-net-worth individuals with bespoke solutions tailored to the complexities of multigenerational wealth. We cross borders to protect, preserve and administer our clients’ financial affairs, offering sophisticated solutions regardless of where you or your assets are located or what stage of the wealth lifecycle you find yourself.

We remove administrative headaches, minimise friction, stay ahead of regulatory change and use tech-enabled solutions to ensure your wealth is safeguarded with accountability, so you can focus on what matters most.

By thinking beyond the third generation, families can break the cycle and redefine what legacy truly means.

Find out more about how Ocorian’s Private Client team can support you throughout your wealth lifecycle and our sophisticated end-to-end wealth structuring and administration solutions here.